View all past Braintrust Ag newsletters here.

Edition #37

May 4, 2024

Good morning and welcome to the Braintrust Ag newsletter. Helping you swing the multiple gates that is your farm business.

A couple notes to begin:

• Welcome all new members! We hit our milestone of 250 members last week! (Currently, 255 members)

www.braintrustag.com/community

• Appreciate everyone’s patience as this newsletter was delayed a week & our upcoming SOIL Gathering was also delayed. Please answer the POLL question below for what topic you’d like covered in the next Zoom meet-up.

Alright, let’s get to the topics that will help you build a strong, sustainable ag operation.

-Clint

Here’s what we have this week:

• 📄 SOPs

• 🌱 Seeds

• 📝 Step-up Basis

• 📅 Happenings

• 🛖 Round Barns

• ⛽ SAF Tax Credit

• and more…

THE BIG IDEA

BA Pro Manager Series

#5: Standard Operating Procedures

So far we’ve laid out the importance of history and business structures, personnel, roles and responsibilities, taking an inventory, and holding effective meetings to be a pro manager. We’ve rallied the troops and are ready to set some policies and procedures in place to realize efficiencies.

What Are SOPs?

Standard Operating Procedures (SOPs) are detailed, step-by-step guides designed to ensure consistency and efficiency in completing tasks on a farm. They act like a recipe for routine farm activities, making sure everyone on the farm follows the same steps every time, whether it's for equipment work, field work, livestock work, or even office work.

Why Are SOPs Important?

1. Consistency: SOPs ensure tasks are completed the same way every time, leading to reliable and predictable results.

2. Training: They are invaluable for training new and seasonal workers, reducing the time and effort required to bring them up to speed.

3. Safety: By standardizing high-risk tasks, SOPs enhance safety on the farm.

4. Regulatory Compliance: For farms under regulatory scrutiny, such as those needing to comply with food safety standards, SOPs provide a way to demonstrate adherence to regulations.

Suggested Categories for SOPs

To keep things organized, consider categorizing SOPs into areas such as:

Crop Production

Livestock Management

Equipment Operation & Maintenance

Grain Handling & Storage

Office & Administrative Work

Buildings & Structures

For example, the management team on a row crop farm implemented a SOP for maintaining their planting and harvesting equipment. This SOP detailed each step for routine checks and maintenance, including specific intervals for oil changes, filter replacements, and inspections of hydraulic systems and belts. By following this SOP, seasonal help could systematically address potential issues before they led to equipment failures. This proactive approach not only minimized downtime during critical planting and harvest periods but also extended the lifespan of the machinery. As a result, the farm saw a noticeable increase in operational efficiency, with fewer delays and a reduction in costly repairs.

Creating Effective SOPs

Here’s a straightforward way to develop and implement useful SOPs:

1. Identify the Task: Choose a task that is performed regularly or is critical to your farm's operation.

2. Perform or Observe the Task: Either do the task yourself or watch someone else do it. Record every step in the process, no matter how minor it seems.

3. Draft the SOP: Write down the steps in the order they should be performed. Use clear, concise language and include any important safety tips. Take it to the next level by saving a video recording.

4. Review and Test: Have someone else follow your SOP to perform the task. Watch for any difficulties or misunderstandings, and adjust the SOP accordingly.

5. Finalize and Display: Once the SOP is clear and complete, make it accessible. Post it where the task is performed, and keep copies in a central farm office.

6. Regularly Update: Review and update SOPs periodically to incorporate new techniques, equipment updates, or changes in regulation.

Tips for Writing Good SOPs

• Keep it Simple: Use plain language and short sentences. Include diagrams, pictures, or even videos if they help clarify steps.

• Be Specific: Clearly state what needs to be done, how to do it, and what tools or materials are required.

• Accessibility: Make sure SOPs are easy to access and read by placing them at eye-level or in digital formats that can be accessed on mobile devices.

Conclusion

Implementing SOPs on your farm might seem like a small step, but it's one that can lead to big improvements in productivity, safety, and compliance. Think of SOPs not as additional paperwork, but as tools for making your farm operations smoother, safer, and more efficient. Remember, the best SOPs are those that are regularly reviewed, easily accessible, and clearly written, ensuring that all farm activities are performed effectively and consistently.

Use this Farm SOP Template to help with this process.

SEEDS

• ✈️ SAF: Here’s how industry groups are reacting to the recently released 40B SAF tax credit announcement. The gist is that it may be a benefit to some producers, but the requirements are generally overbroad & burdensome. We’ll see how this impacts the more anticipated 45Z Clean Fuel Production tax credits coming in 2025. A breakdown of the 40B SAF program + a checklist/fact sheet is below.

• 👨‍🌾 Hay: A Braintrust Ag member just launched his side project. HayforSale.com is an easier, simpler way to buy & sell hay. Check it out & support this young, ambitious farmer.

• ⚖️ Trustees: Here’s a good summary of Crummey notices and why they’re necessary for some estate plans. A Crummey notice is sent by the trustees of an irrevocable trust to beneficiaries to let them know a gift has been made to the trust.

• 📉 Outlook: Nearly 80% of ag economists expressed concerns about declining commodity prices and rising input prices leading to more consolidation of row-crop operations.

• 📅 Landowner Calendar: Poor farm lease management carries risk, and one way to stay on top of communications is to set up a calendar to remind you to touch base with landlords. Here’s a free eBook & calendar template from Oaken to get you started.

• 🐂 For Fun: #88 has taken the AgTwitter world by storm and has had a uniting effect on the various ag opinions out there. The question remains… when will she calve?

STEP-UP IN BASIS

A farm couple in their 70's asked about deeding land to their kids.

A note on basis, step-up in basis, and capital gains tax:

→ 600 acres valued at $15,000/acre

→ They paid $400/acre for it (their basis)

If they were to simply deed it to their kids now, it's considered a gift.

No reason they can't do that... but, their kids would then own the land w/ a $400 basis.

That means, if a year later any of the kids were to sell the land, they'll have a big capital gains tax due.

Assuming capital gains tax rate of 15%:

$15,000 (Sale value) -$400 (Basis) =$14,600 (Gain)

$14,600 x 15% = $2,190 per acre they would pay in TAX.

However, if the land passes to the kids upon death (inheritance) the kids receive a "step-up in basis."

Which means the basis is adjusted to the FMV at the time of death.

Assuming capital gains tax rate of 15%:

$15,000 (Sale value) -$15,000 (Basis) =$0 (Gain)

$0 x 15% = $0 per acre they would pay in tax.

For the full 600 acres, that's saving $1,314,000 in potential future tax.

Now, there may be reasons to gift while alive (lifetime estate tax exemption, Medicaid, etc) but the general rule is: for capital gains tax it's best to inherit assets versus receive as a gift.

Because of stepped-up basis.

Become a member today for lifetime access to everything. It’s a small one-time cost with NO recurring subscription.

PEER GROUP HAPPENINGS

A couple mentions on what Braintrust Ag members are up to:

1) Here’s Steve Strasheim’s story of starting a market farm from scratch and growing it to a full-time job + 5 employees:

2) What topic should we discuss at our next Zoom member meet-up?

ROUND BARNS

If you like round barns, check out this thread:

ESP SPOTLIGHT

Endorsed Service Providers are pivotal to the Braintrust Ag community. These industry experts know their professional services niche and how they directly impact farmers, ranchers, and other ag business owners.

This week, I’d like to direct your attention to our latest ESP Fractal Agriculture.

Fractal Agriculture is a U.S.-based company that supports farmers by providing capital for land expansion through passive minority stakes, fostering collaboration between farmers and investors for an owner/operator-led future.

If you’d like to learn more about the ESP program, click here.

If you get value from these newsletters, consider joining 240+ other ag people and become a member of Braintrust Ag. Your support makes this content possible.

SAF Tax Credit Update

Corn and soybean farmers, there are significant updates to the Sustainable Aviation Fuel (SAF) tax credit program that could benefit you if you are using climate-smart agriculture (CSA) practices. The recent changes align with the U.S. Department of Agriculture’s (USDA) push to promote environmentally friendly farming techniques that contribute to sustainable fuel production.

Here's what you need to know about the latest developments in the SAF 40B tax credit program:

Federal Subsidies for Climate-Friendly Farming

Corn-based ethanol and soy-based biofuel now qualify for federal subsidies if they are sourced from farms employing "climate-friendly growing techniques." This includes practices such as no-till farming and planting cover crops. Biofuel producers using these feedstocks can receive SAF 40B tax credits ranging from $1.25 to $1.75 per gallon, incentivizing the use of domestically produced, lower-carbon fuels.

Climate Smart Agriculture (CSA) Pilot Program

The USDA has set up a CSA Pilot Program to specifically reward these practices:

For Corn: Farmers must implement all three of the following practices:

1. No-till farming

2. Planting cover crops

3. Using enhanced efficiency nitrogen fertilizer

For Soybeans: Farmers are required to implement both:

1. No-till farming

2. Planting cover crops

Direct Contracts Required

To receive these incentives, farmers must have a direct contract with an SAF fuel producer. This ensures that the feedstocks used are traceable and meet the sustainability criteria set forth by the program.

Recordkeeping and Compliance

Understanding and adhering to the specific definitions and recordkeeping requirements is crucial for compliance and to benefit from the program. To assist with this, I’ve distilled the critical points from the 41-page "Notice 2024-37" into a straightforward checklist and fact sheet.

This resource outlines the general requirements, specific practices for corn and soybean production, and detailed recordkeeping guidelines to help ensure that you meet all necessary criteria to qualify for the tax credits.

MEME OF THE WEEK

That’s a wrap, folks.

Until next week, thank you to everyone involved in ag.

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DISCLAIMER: All content, communications, and resources provided by Braintrust Ag, its principals, operators, or members is intended to merely be educational and entertaining. Nothing published by Braintrust Ag should be relied on as legal, financial, investment, or other professional advice. Investments and legal matters involve substantial risk and are not suitable for all individuals. It is recommended to enter into a client relationship with an ESP for obtaining professional advice.